QUESTION 3 (25 marks)

Below are the information in regards to Mr. Khairuls cash & cash equivalents, investment assets as well as personal used assets. He is currently 60 years old and he plans to liquidate all of his investment assets for the purpose of retirement and to keep it in the fixed deposit that can give a rate of return of 4%, while the inflation rate is expected to be 3%.

Cash/Cash Equivalent		RM50,000.00
Savings Account	RM20,000.00
Fixed Deposits	RM30,000.00
Investment Assets		RM750,000.00
Quoted stocks & shares	RM180,000.00
Unit Trust	RM90,000.00
EPF Balance	RM230,000.00
Real Estate	RM250,000.00
Personal Used Asset		RM700,000.00
Residence	RM400,000.00
Motor Vehicle	RM100,000.00
Antiques	RM30,000.00
Home furnishing	RM50,000.00
Golf club membership	RM70,000.00
Jewelleries	RM50,000.00
		RM1,500,000.00

Nonetheless, Mr. Khairul is not sure whether what he plans will be enough for his retirement age. Mr. Khairul intends to get an advice from you, a financial planner from Diamond Wealth Management on his retirement plan. At this point of time, his current spending is RM55,000.00 per year.

REQUIRED:

1. If he can live for another 20 years, calculate the first year retirement income by considering the inflation factor. Assume that he uses all of his investment assets for the purpose of retirement.
   2. marks]
2. If he sticks to present spending of RM55,000.00 per year with 3% increase annually to counter inflation, how long that his retirement fund from the investment assets will last?
   2. marks]
3. Based on your calculation in (b) above, you found that Mr. Khairuls current retirement fund is not sufficient to cover for his retirement age of 20 years. Outlines at least four (4) strategies that can be used to stretch Mr. Khairuls retirement plan without compromising the desired annual retirement income that is RM55,000 per year.
   2. marks]
4. Based on the strategies that you have outlined in (c), prove that your strategies are able to stretch Mr. Khairuls retirement fund. Support your strategies with calculations. Assume that the rate of returns for Unit Trust = 7%; Bond =5%; Short Term Fixed Deposit (1-2 years) = 3.8%; and Long Term Fixed Deposit (3-5 years) = 4.5%.